Nuvoco Vistas IPO subscribed 12% so far on day one; grey market premium muted, should you subscribe?

70% of the issue or Rs 3,500 crore is part of an offer for sale (OFS) by existing shareholders while the remaining 30% of Rs 1,500 crore is a fresh issue of equity shares.

Nuvoco Vistas Corporation’s Rs 5,000 crore IPO has been subscribed 12% so far on the first day of bidding. The public issue of the Nirma Group company will remain open for subscription till, August 11. Investors can bid for the issue in the price band of Rs 560-580 per share, in a bid lot of 26 shares. Nuvoco Vistas is the fifth largest cement company in India and the largest cement company in East India in terms of capacity. In the unlisted space, the company’s shares were trading at a premium of Rs 15 per share or 3% from the higher end of the price band. Nuvoco Vistas IPO is among the four IPOs that will be available for investors to subscribe to.

So far retail investors have subscribed to 24% of their portion or 74.66 lakh shares against 3.12 crore on offer for them. Meanwhile, non-institutional investors (NII) have subscribed to 1% of the reserved portion or 1.33 lakh shares against 1.34 crore on offer. Qualified Institutional  Buyers (QIB) were non-existent on the first day, subscribing to less than 1% of the portion reserved for them. This translates to an overall subscription of 12%. Half of the entire Rs 5,000 crore IPO has been reserved for QIBs while 35% is available for retail investors. This leaves only 15% of the entire issue for NIIs.

70% of the issue or Rs 3,500 crore is part of an offer for sale (OFS) by existing shareholders while the remaining 30% of Rs 1,500 crore is a fresh issue of equity shares. Post issue the promoter group shareholding in the company will come down from 95.2% to 71%. Public shareholding will increase to 29% from the current 4.8%.

IDBI Capital

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“We understand Nuvoco IPO at the upper band is priced at 10x FY23E EV/EBITDA or EV/t of USD131. Valuation is at discount to its large-cap peers at 12x-19x FY23E EV/EBITDA. Discount partially factors high debt in its books (FY21 Net Debt / EBITDA of 4.5x) and low ROCE. But given the up-cycle in the cement industry and expectation of improvement in margin and balance sheet deleveraging over FY21-23E we recommend SUBSCRIBE.”

KR Choksey

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“We believe NVCL IPO gives investors an opportunity to invest in a leading cement manufacturer who has the highest market share in east India. We are also optimistic about the sector and expect opportunities to scale up with the governments continuous push for the infrastructure sector. Net debt/ EBITDA stands high at 4.5x which will come down with their objective of repayment through IPO proceeds. Hence On valuations parse at upper price band (Rs 570/-), the issue is asking for a market cap of Rs 20,358 Cr with P/BV at 2x FY21. On EV/EBITDA front it is still trading at a discount to most of its large cap peers at 15x-19x FY22E EV/EBITDA and on operational front it stands better at 19% margins against industry margins of 14-16%. Thus, considering all the above factors we recommend to invest for long term investment.”

HEM Securities

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“Company is bringing the issue at price band of Rs 560-570 per share at post issue EV/EBIDTA multiple of 16 on FY21 EBIDTA basis. Company being largest cement manufacturing company in East India in terms of total capacity with market-leading brands that & experienced individual promoter and professional management team has strong future potential. Hence we recommend “Subscribe” on issue for long term purpose.”

Invest19

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“No doubt, the industry is promising but its financials lack confidence. Direct revenues of the company have increased marginally by 2.89% in the last two years. EBITDA margins of the company stood at 19.86% in FY21 while Shree Cement claims the highest EBITDA margins at 32%. Return on Capital Employed of the company at 4.21% is very much low in comparison with its listed peers. The company has one of the highest high Debt/Equity ratios at 0.92x among the large players. The industry is promising and EV/EBITDA is trading at 13.6 times, priced lower than the listed players, which is the only reason to ‘Subscribe’ but with ‘Caution’.”